Building Habits Early for a Better Financial Future


Stephen Forlani, JD, Vice President, Financial Planning
Mike Rayfield, CFA, CFP®, Vice President, Investment Advisor

This Summer, Ancora’s wealth planning team introduced an educational webinar series designed for early to mid-career professionals. The Foundational Finance series aims to explore the building blocks of financial wellness, such as the basics of wealth accumulation and long-term financial planning. We recognize that many individuals receive limited financial education in college or in their early careers. Our goal is to help fill this knowledge gap and provide young people with a more solid foundation to build upon in terms of their financial independence, retirement savings and protecting their families during their wealth accumulation years.

Long-term financial planning should be goal-based, comprehensive and tailored to the specific individual, couple or family. Before looking at the bigger picture, however, it is important to establish productive financial habits at a young age. In an effort to provide guidance to those seeking to establish these habits, we have focused our first Foundational Finance series on three topics: maximizing the efficiency of your employer-sponsored retirement plan, understanding basic investment concepts as you begin to build a portfolio and ensuring you have the right approach to securing your financial health for the long term. 

Our intention is for these topics to address key questions that young professionals may be facing early on in their careers. We discuss some of these questions below but would also encourage young people to watch the recorded sessions available on our website for those who were not able to join us live. We also hope to tailor future Foundational Finance topics based on participant feedback and continue the series in the future. 

Q: If you had to give one piece of advice to an early to mid-career professional, what would it be?

Start saving early! Every dollar you are able to put away as early as possible will have a meaningful impact on your retirement, especially if you are able to start saving in your early 20s. It’s amazing what a few hundred dollars of savings can turn into in 40+ years. We often see young people start their careers and decide to put off saving for retirement for 5-10 years when they’ll likely have a higher salary. However, due to the power of compounding, they are actually doing a huge disservice to themselves by missing out on that growth potential. Additionally, human psychology tells us that establishing good habits early on can be easier to maintain and can lead to increased savings levels as someone progresses in their career. 

Q: Are there any ways to enhance retirement savings?

Absolutely. The simplest way is by taking full advantage of any employer match that may be offered with your employer-sponsored retirement plan. Many employers offer some sort of matching contribution, which typically requires the employee to also contribute at least a specified minimum amount. It is important to check the provisions of your employer’s plan to confirm whether and how much of an employer match may be available to you. In addition, by contributing to either a traditional retirement plan or Roth retirement plan, you can enhance your spending ability in retirement. We discuss these concepts in more detail in Session I of the Foundational Finance series.  

Q: How should early to mid-career professionals invest their retirement savings?

It is important to understand that there is no such thing as a ‘perfect’ portfolio and there is no singular method of investing that would be right for everyone. When investing your retirement savings, there are really two key things to consider: 1) your ability to take on risk; and 2) your willingness to take on risk. Note that when we talk about risk in this sense, we are referring to the risk level of the portfolio as a whole. Most young people have the ability to take on risk because their investment time horizon is very long (30-40 years until retirement). A longer time horizon allows for greater ability to withstand the market’s inevitable short-term fluctuations. 

However, the more difficult aspect to assess is your willingness to take on risk. We often hear people say that they have a high tolerance for risk, but that sentiment changes very quickly if the market suffers a significant decline over a short period of time. It’s important to consider the down-markets as well as the up-markets when contemplating your willingness to take on risk. 

Your portfolio should then be assembled according to your risk preferences. When a portfolio is not appropriately allocated to match a risk tolerance, we might witness someone ‘panic selling’ in a down-market, which can harm their portfolio’s long-term growth potential. They’d likely be worse off than if they had chosen a more conservative portfolio to match their risk tolerance. There is absolutely nothing wrong with having either a high or low tolerance for risk; the important factor here is to understand your tolerance and make sure your investment portfolio is tailored to match understanding that less risk is commonly associated with less return over extended periods of time. 

Q: What are some other financial wellness tools to consider beyond investments?

Session III of the Foundational Finance series explores this topic in-depth. There are a number of simple things you can do to protect your assets and your partner or family. We discuss some of the basic estate planning documents such as wills, medical power of attorney and financial power of attorney, which are an important step in determining who will make decisions in times of crisis and how assets may pass to the next generation. Some may also want to consider setting up trust documents that will govern the transfer and distribution of assets to future generations, among other considerations. We help many of our clients find the right estate planning attorney to address their specific needs and goals. 

Another important planning tool to consider is life insurance. If both spouses are working and something happens to one of them, a modest life insurance policy could help supplement one salary and lessen the financial burden on the family in the event of a premature death. While these are difficult topics to contemplate, small steps taken now can provide protection and peace of mind for the future. 

Lastly, we often see additional property and casualty insurance policies overlooked by young people. As you progress in your career and your assets grow, it is very important to revisit your coverages on a regular basis to ensure your family and your assets are protected. Coverage can be fairly inexpensive and is an important facet of your holistic financial plan. 

We recognize that every individual or family situation is different, so the estate planning documents and insurance needs will be different for everyone. The first step is to start thinking about your needs and building your roster of professionals (estate attorney, financial advisor, insurance consultant, etc.) who can help you along the path to financial wellness. We greatly appreciate the participation of those who have attended our live Foundational Finance sessions and look forward to presenting more topics in the future. If you haven’t been able to join us, we encourage you to check out the recordings available on our website and reach out to our wealth planning team if you would like to discuss any of these topics further. 

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